‘Modern industrial strategy’ sought on chip subsidies
WASHINGTON — It would be easier to be sanguine about the government’s coming dispersal of $52 billion in subsidies for semiconductor manufacturing and research if Commerce Secretary Gina Raimondo did not celebrate it so lavishly. Her language suggests that what should be a narrow national security measure might become a broad, perennial temptation for government.
But, then, were she not in charge of the dispersal, the Senate might not have passed it 64-33. Here are the problems regarding chips and her terminology.
Many chips are designed in the United States, but 90%, and 100% of the most sophisticated ones, are manufactured elsewhere. This is an economic and military vulnerability.
Chips are ubiquitous in consumer goods. Automakers lost $210 billion in sales because of troubles with the chips supply chain during the pandemic.
Even more troubling, 98% of the chips the Defense Department purchases are manufactured and packaged in Asia. Ninety-two percent of the most sophisticated chips come from a single Taiwanese firm.
Speaking in her office in the Commerce Department building, which is named for a previous secretary, Raimondo is emphatic: The reason for subsidizing the “on-shoring” of chips manufacturing is “100% national security.” Manufacturers should “produce what the market decides, but do it in America.”
In a November speech, however, Raimondo said these “transformational” subsidies will enable “reimagining our national innovation ecosystem well beyond Silicon Valley.” And she anticipated “new collaborations among businesses, universities, labor, and local communities” concerning “advanced computing, biotechnologies and biomanufacturing, and clean energy technologies.” Hence, “we are working across the government” to “invest in core critical and emerging fields of technology,” for “revitalizing” manufacturing.
So, far from being “100% national security,” the rationale for the $52 billion is government-driven transformation of, potentially, American society.
Congress has also provided a $24 billion tax credit over 10 years for “fabs” — chip manufacturing facilities — and more than $170 billion over five years for research. Raimondo says all of this “modern industrial strategy” is “rooted deeply in America’s history — from Alexander Hamilton’s Report on Manufacturers to President Lincoln’s intercontinental railroad.” Not exactly.
Hamilton’s protective tariffs, the “internal improvements” of Henry Clay’s “American system” and the 1862 Morrill Act were designed to facilitate individual striving to propel a fast-unfolding and unpredictable future. They were not measures to implement a government-planned future. …
Government always needs but rarely has epistemic humility, an understanding not just of what it does not know, but what it cannot know. Such as what unplannedby-government human creativity will cause to emerge, over the horizon. And how government planning of the future, by allocating resources, can diminish it.
Today, government should first do what it actually can do. …
Raimondo, 51, the Biden administration official perhaps most admired in Congress and among privatesector leaders, is the Democrat most qualified to be president. Her implementation of a narrowly targeted program to rectify one national vulnerability can be an audition for a higher office for which she has impressive skills. It should not become a pilot program for broad government “reimagining” of this and that, for which government has no aptitude.